IFSRA board orders urgent review into Anglo loans

 

The board of the Irish Financial Services Regulatory Authority has ordered an “urgent review” of matters surrounding directors’ loans at Anglo Irish Bank and said it takes a “very serious view” of the issues.

The chairman, chief executive and a non-executive director of the financial institution have resigned over the issue in the past two days.

In a statement on the Financial Regulator’s website today, the board of the regulatory authority said it had met yesterday and today to discuss the matter.

“The board takes a very serious view of these issues, which were first brought to its attention on December 17th 2008.”

It said it had established a committee “to undertake an urgent review of these events and the regulatory response” and said that report would be sent to the authority in three weeks’ time.

“The authority has instigated a review to determine the treatment of directors’ loans in the institutions covered by the Government guarantee so as to ensure that proper standards are being observed.”

The statement said the authority had already intensified its “prudential supervision” of the covered institutions and other regulated entities.

“Regulator staff have been placed in all covered institutions on a full time basis.”

Minister for Finance Brian Lenihan had earlier called on the board to carry out such an urgent review.

Pressure mounted on the Financial Regulator today as Government Ministers said questions needed to be answered about why the issue did not come to light until this week.

Minister for Social and Family Affairs Mary Hanafin said the Financial Regulator had serious questions to answer over the loans controversy.

Minister for the Environment John Gormley said the Financial Regulator needed to explain comprehensively what would appear to be his “extraordinary complacency” in the face of events at Anglo.

Mr Gormley said that to most ordinary people what occurred there was unacceptable and that it filled them with disgust.

Financial Regulator Patrick Neary is believed to have known since January that Anglo chairman Sean FitzPatrick had been temporarily transferring Anglo Irish Bank loans worth €87 million to another bank between 2000 and 2007 to keep them off the balance sheet at the financial year end.

Mr FitzPatrick's actions were not illegal, but he accepted they were "inappropriate and unacceptable from a transparency point of view".

Ms Hanafin said today of the regulator: " think there are questions about information he had over 11 months that wasn’t acted upon or information that wasn't even given to the Minister for Finance until two days ago, particularly in the context of the past few weeks when there has been so much talk of recapitalisation of banks, of state guarantees and trying to protect the consumer."

"I think there are really serious questions and I don't know why that information wasn't given before now."

However Ms Hanafin stopped short of calling for Mr Neary's resignation.

"There may be a whole pile of reasons why this information was kept. It wouldn't be fair for me to get into that," she told Newstalk radio station.

"It's very difficult to see the circumstances as to why the Minister for Finance, at a time of actively negotiating with the financial sector, did not receive that information."

Chief executive David Drumm and non-executive director Lar Bradshaw also stepped down from Anglo Irish Bank.

Mr FitzPatrick also resigned his non-executive directorships with Aer Lingus, food company Greencore and packaging group Smurfit Kappa.

Newly appointed Anglo Irish Bank chairman Donal O'Connor said the financial institution would co-operate fully with the Irish Government in talks over the €10 billion ecapitalisation plan for the banking sector.

Fine Gael deputy leader and finance spokesman Richard Bruton questioned the announcement by Minister for Finance Brian Lenihan's that he would underwrite the capital needs of Anglo Irish Bank.

"The only purpose of using scarce tax-payer resources to recapitalise any Irish bank is to restore the availability of credit to Irish households and businesses to underpin economic recovery. Banking is built on trust. Having lost the trust of both the markets, the regulatory system and the wider public, recapitalising Anglo Irish Bank using tax-payer resources is, in Fine Gael's view, neither appropriate nor is likely to have any impact on credit availability," Mr Bruton said.

"Increasingly scarce taxpayer resources should instead be used to recapitalise those systemically important banks that have a viable, independent future in supporting the Irish economy."